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What’s in a Postcode?

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A couple of miles outside of Bath is the affluent suburb of Lansdown. Its home to the grandiose Lansdown Crescent and Beckford’s Tower, boasting a prosperous history. It’s therefore surprising that it has been named the debt capital of Britain. The average debt for someone living in Lansdown and the neighbouring towns of Keltson and North Stoke, is £2,311. This said, it is interesting to look at the distribution of debt in the current economic climate in the UK.

Under the BA1 9 postcode a 3 bed maisonette could set you back nearly £2 million and local Conservative councillor Patrick Anketell-Jones has said “I have had no reports of destitution in the area. I’ve never considered [debt] as a problem in the ward.” He believes that these findings are a result of it being easier for people with huge homes and gardens to be accepted for bank loans when they have substantial assets.

Dealerships in the area are reporting significant increases in sales. Danny Sacco, manager at a Mazda garage, reported the sale of 72 new cars in March, adding that 82% of purchases were made on credit and that many people are taking advantage of 0% car finance deals so there aren’t many reasons for someone to pay for the car upfront. “There was a lot of pent-up demand”… “Cars are a good barometer of the economy… People are optimistic”.

So why are people so optimistic in such a bleak financial climate? Well it may be due to the fact that the rate of pay increases has caught up with the inflation rate, suggesting that people may be more confident to borrow.

In order to qualify for a personal loan, your credit rating needs to be pretty good. After all, you have to convince the bank that you will be able to make your repayments. These are therefore not the first choice for those already struggling with their finances. Payday loans and overdrafts tend to be the preferred option for this group with higher likelihood of being accepted for a loan, even with poor credit history. This highlights that personal loans are only part of the picture. The British Bankers’ Associations (BBA) figures only cover 60% of the personal loan market in Britain. They only take into consideration 8 banks in the UK, which is a drop in the water considering there are dozens of lenders in the UK. This inevitably demonstrates that figures are not representative of the bigger picture of debt in Britain.

“This data is complex and it remains very difficult to draw firm conclusions about lending at a local level,” says Richard Woodhouse, the BBA’s chief economist. The regional breakdown of lending is important as it depicts £901 billion of outstanding mortgage debt, 44% of which is owed in London and the South alone, and at the same time the house prices and wages are highest. Over the last few years, the BBA’s own data shows that repayments to High Street banks of loans and overdrafts have overtaken new borrowing, which is a reverse in the trend seen before the recession. For example in Feb 2006 new borrowing overtook repayments by a staggering £1.1 billion.

So what’s in a postcode? Not necessarily what meets the eye. In a healthier economy, banks would be keener to lend and people keener to borrow. This said, people still have the desires they had to buy a car before the recession, and with the rise in individuals taking advantage of 0% finance deals, and  car leasing, it is clear that these desires can still be fulfilled, no matter where you live in the UK.

If you are interested in applying for car finance or want to find out how much you could comfortably afford, have a look at our lending options.

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